The Economist

In case you’ve been following the discussion here about austerity and stimulus or microeconomic vs. macroeconomic ideas for ending the global recession, the following might be interesting.

Check out the April 28, 2012 issue of The Economist, which had Francois Hollande on the cover with the headline, “The rather dangerous Monsieur Hollande.”

The Economist is a center right publication and my impression is that the editorial board are not believers in Keynesian economics. Nonetheless, a column on page 61, “Charlemagne,” had this to say about austerity: “Germany’s predilection for all-round austerity is a mistake, with financial markets now worried as much about deep recession as about deficits.”

Austerity is a negative stimulus to an economy. Less money circulating means more unemployment, which means more people falling into the social safety net, which means more deficits. It’s better to have deficits that serve the broader purpose of stimulation than to simply spend on supporting the dole.

The economy appears to be on the minds of magazine editors these days and no wonder. With the stimulus running out the economy appears to be headed south again. This contradicts my experience last week in Silicon Valley where the CEOs I met with said they were,

1) Raising more money, not because they need it but because it’s cheap and the VCs are having a hard time finding good late stage investments.

2) Readying for market new offerings aimed at specific segments that may have been under served before.

3) Desperately trying to hire people. The people I met with have openings whose sheer numbers astound you. The CEOs I met with told me the could easily double their sizes in the coming year if only they could find 50, 100 or 200 qualified people. At Dreamforce Marc Benioff said his company has about one thousand openings.

These and many other CEOs know that they have to hire ahead of the demand curve and demand is brisk. To be sure, the jobs we’re talking about are not aimed at the unemployed factory worker — at least not the one who hasn’t been retrained. That brings up a difficult discussion of how we as a society respond to changes in the marketplace and the value of our educational system. This piece is not intended to be a deep dive on either, merely an observation. But back to the magazine editors.

On the flight home I managed to read almost the entire October 1 edition of The Economist it’s the one with the cheerful picture of the universe and a black hole. Superimposed on the blackness are the Halloween-ish words “Until politicians actually do something about the world economy…Be Afraid”. Inside the issue takes aim at politicians on both sides of the Atlantic and the lead editorial ends with something so succinct I see no reason to attempt to paraphrase it and so I quote it in full:

“Lacking conviction and courage

In the aftermath of the Lehman crisis, policymakers broadly did the right thing. The result was not a rapid return to prosperity in the West, but after such a big balance-sheet recession that was never going to happen. Now, more often than not, policymakers seem to be getting it wrong. Their mistakes vary, but two sorts stand out. One is an overwhelming emphasis on short-term fiscal austerity over growth. Fixing that means different things in different places: Germany could loosen fiscal policy, while in Britain the reins should merely be tightened more slowly. But the collective obsession with short-term austerity across the rich world is hurting.

“The second failure is one of honesty. Too many rich-world politicians have failed to tell voters the scale of the problem. In Germany, where the jobless rate is lower than in 2008, people tend to think the crisis is about lazy Greeks and Italians. Mrs Merkel needs to explain clearly that it also includes Germany’s own banks—and that Germany faces a choice between a costly solution and a ruinous one. In America the Republicans are guilty of outrageous obstructionism and misleading simplification, while Mr Obama has favoured class warfare over fiscal leadership. At a time of enormous problems, the politicians seem Lilliputian. That’s the real reason to be afraid.”

That “collective obsession with short-term austerity across the rich world” and getting it wrong generally, were the subjects of another economists life’s work. John Maynard Keynes lived and wrote in the first half of the twentieth century about times that are increasingly looking like our own. In a well written and very useful article by John Cassidy in the October 10 issue of the New Yorker, Cassidy asks the essential question — What would Keynes do?

In practice Keynes would do nothing as he was never an elected official but he did advise them. His prescription would have been to increase aggregate demand — that sounds like complicated economicese but it really boils down to stimulus. Get people working and paying taxes and while we’re at it lower taxes to make spending more attractive. That means the government as buyer of last resort. As the economy recovers those policies can be trimmed and the debt incurred by the government can be repaid.

All this stands in sharp contrast to The Economist’s observation that an “overwhelming emphasis on short-term fiscal austerity over growth” is causing harm to the global economy and no good aside from giving politicians the chance to strut for increasingly tiny fringe audiences in advance of an election.

The politicians in California are safely sequestered in places like Sacramento and HP where Meg Whitman who recently ran for governor now presides. The Silicon Valley economy is by all measures thriving. What do they know that we should?

New research from Harvard Business School and the Pew Research Center’s Internet & American Life Project give new perspective to the social media and social CRM phenomenon and raise a yellow flag for all those people proclaiming social media the second coming. First Harvard.

The Economist ran one of its special report sections this week (the issue with Steven Jobs dressed as Moses on the cover) on social networking. While generally laudatory of the technology’s promise — headlines include “Profiting from friendship” and “A peach of an opportunity” — the report also delivered the unvarnished and synamic truth about adoption.

A section titled “Twitter’s transmitters, The magic of 140 characters” quoted the work of Mikolaj Jan Piskorski, a Harvard Business School professor, and one of his MBA students Bill Heil. According to The Economist, the researchers surveyed more than 300,000 Twitter users in May 2009 and reported results that include:

More than half said they tweeted less than once every 74 days (not quite twice per quarter).

The most active 10% of twitter users published 90% of all Tweets.

By comparison, the article says that on other social networks, “the most active users typically produce 30% of all content.” Holy #$%^ Batman!

So who are these people? According to Pew, they’re the kind of people you might want to have a beer with — when they’re older. As reported in “Fast Company” Ninety-three percent of teens between 12 and 17 go online, 66% say they text. The 18 to 29 group also has a 93 percent rank of online users and though the numbers slip for real adults — 81% of those 30 to 49 and 70% of those 50 to 64 — the numbers are very healthy.

Get more numbers here: http://www.fastcompany.com/blog/zachary-wilson/and-how/pew-survey-finds-increase-social-media-internet-time-decrese-blogging-te

The question though is what are these people doing when they are online? Teens are giving up on blogging, their numbers are about half what they were a few years ago. Facebook is the big winner for kids and time-starved parents like Twitter. Only 15% of young adults bother to blog, down nine points over two years.

What’s it all mean?

The Fast Company article ends with this, “Meanwhile, blogging is on the rise for adults over 30, who increased to 11% from 7% in 2007. And 47% of adults now use social networking sites, up 10% from a year ago.”

It seems the most economically viable demographic is getting its act together but there are caveats. There are many more readers than writers — that’s not surprising, it’s human nature. But I think you need to be wary here. Diane Hessan, CEO of Communispace, likes to remind me that in social networking, participation is very important and knowing the demographics of participation is vital.

The ten percent of Twitter users contributing ninety percent of tweets with more than half logging on very occasionally is a red flag for anyone contemplating social media marketing because it exposes an important truth that membership is not participation. There is no t enough data on the Twitter users who tweet once per quarter. Do they go to Twitter daily to read stuff? I am sure some do, but I wouldn’t want to base a marketing campaign on it.

The decline in blogging is a clear indication that there is, or soon will be, less to read on blogs and less to comment on, though there will be more personal stuff to see on Facebook, if you have a lot of friends.

I have recently seen a number of CRM products that capture such valuable information as a person’s Twitter, Facebook and Blog account information. The vendors are certain that this information is the source of new insight and business opportunity, even in the B2B space. I am not. This data suggests that just as vendors are ramping up, the raw material that they expect to mine may be drying up. Notwithstanding the 11% of adults over 30 who are blogging more, it seems to me that people are moving to personal expression that may not have a great deal of business utility.

Some of the explanation for this may be the rotten economy but we’re about four months into a turnaround, and numbers complied last May are already becoming obsolete. Business activity is picking up but it is unclear if people are turning to social media to do their business networking.

The lesson from this, for me, hews close to Hessan’s advice. You need to understand who is participating — not their names and other identifying data but participation per person or organization, demographic data and the like. A lot of 17 year old boys might be attracted to the new models on an exotic car site for instance, but you wouldn’t want to develop a marketing campaign for them.

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